SMSFs vs APRA-regulated super funds: How does efficient SMSF management create an edge?
The major competitors for Self-Managed Super funds are APRA-regulated super funds.
What are APRA-regulated super funds?
APRA-regulated super funds are superannuation funds that are regulated by the Australian Prudential Regulation Authority.
How is an SMSF different from an APRA-regulated super fund?
- SMSFs are fully controlled by Trustees and members, while APRA-regulated super funds are professionally managed by a licensed professional fund manager
- One SMSF can have a maximum of four members, while APRA-regulated super funds can be of various sizes with a huge number of members.
- The SMSFs are regulated by the ATO, and as the name suggests, APRA-regulated super funds are overseen by the Australian Prudential Regulation Authority
- In the case of SMSFs, the control of where to invest and when to invest stays with their members, while for APRA-regulated super funds, this control is under the professional fund managers.
- For SMSFs, the investment options are very flexible, while APRA-regulated super funds also have a broad range of options to invest in, but they are still limited to pre-set avenues.
- The compliance risk is comparatively higher for SMSFs compared to APRA-regulated super funds.
What do we infer?
- As SMSFs are more of a do-it-yourself approach, the investment control stays with the members, but this comes with higher admin, audit and compliance workload.
- The absence of institutional oversight in SMSFs increases the risk and accountability of the funds.
- The accounting firms and advisers need to spend additional effort on choosing the right investment strategy for SMSFs, as they are mostly managed by trustees or members of the fund.
How can managing the SMSF be easier?
- The primary difficulty in managing an SMSF isn’t about investing, but the paperwork, reconciliations, and compliance involved in it.
- Keeping up with the changing regulations in the evolving regulatory environment that involves frequent changes, updates to regulatory guides, Payday Super, etc.
- Accounting firms and advisers need to invest time in devising the best investment strategies, tax planning, and asset allocation (which is done by qualified trustees in APRA-regulated super funds).
- SMSFs can have an upper hand and control of their own funds compared to other regulated funds, when admin, compliance work, accuracy, and turnaround time can be improved by choosing reliable support providers.
